The Debt Ceiling Debate in Perspective
Secretary Geithner often argues that the reason we must raise the debt ceiling is that 40 cents of every dollar the government spends is borrowed. That fact, in my opinion, is the perfect argument for why we can’t continue on this path.
The chart below uses data from the Office of Management and Budget’s FY2012 budget and shows that 43 cents of every dollar spent in 2011 is borrowed (CBO data shows 40 cents rather than 43, which explains the 3 cent difference). Some of the increase, of course, is the product of the recession and the shortfall in tax revenue (that part of the increase will go away when the economy picks up). However, the rest is the result of large spending increases, some of which won’t go away when the economy recovers.
This fact alone propels our current fiscal state further along the historical trend of budgetary deficits. As the critical debate over the debt ceiling continues, the amount of spending that is borrowed should be put in proper perspective. This makes all the difference in addressing the underlying habits driving our current deficit.